The present invention relates to credit card marketing systems, and more particularly, to methods and devices for facilitating easy and inexpensive issuance and activation of credit card accounts.
Credit cards are a powerful financial tool and provide consumers with considerable convenience and flexibility. In 1996 alone, consumers charged more than one trillion dollars on their credit cards. For successful credit card issuers, the credit card business can be very profitable. When profit per cardholder is considered, it is clear why card issuers are so aggressive in their pursuit of new accounts. The average credit card account, for example, had a balance of $1,828.00 in 1996 and earned the credit card issuer an estimated $329.00 a year in interest, in addition to cash advance charges and other fees collected from the consumer. Card issuers generate additional revenue from merchants, in the nature of transaction fees of 2 to 4 percent for every purchase that is charged to a credit card.
With the market for credit card accounts nearly saturated, competition among credit card companies has increased dramatically. Visa alone is estimated to have more than six thousand independent issuers. Accordingly, credit card issuers are constantly searching for new techniques and promotions to encourage new accounts. For example, as an added incentive to open or maintain an account, many credit card issuers offer reward programs that provide cardholders with discounts and free gifts.
Many credit card issuers attempt to attract new customers with various direct marketing promotions. Typically, credit card issuers identify potential customers by analyzing consumer credit histories to identify consumers who are good credit risks. Once customers are identified, an individual credit card issuer will often send many different mail solicitations to each targeted customer. During 1996 alone, credit card companies mailed out more than two billion unsolicited offers for new credit cards to U.S. households, in addition to placing tens of millions of telephone calls, in an attempt to sell consumers on accepting their cards.
While credit card issuers are somewhat successful in obtaining valuable new customers with such direct marketing approaches, it has been found that the vast majority of consumers ignore such promotions, in view of the number of promotions received and the failure of credit card issuers to differentiate their credit card products and various direct marketing promotions. In order to reach valuable new customers, many credit card issuers have turned to affinity partners to help identify credit-qualified new cardholders. Credit card issuers market to an affinity partner's customer base in an attempt to recruit new cardholders meeting the issuer's credit requirements. To motivate the customers to obtain and use an affinity card, the customer often receives special benefits from the affinity partner in return for the use of the card. Airline mileage affinity cards are a well known example of an affinity program, where money charged on the credit card earns frequent flyer miles in the rewards program of the affinity airline.
In 1996, it cost a typical issuer between $60 and $75 to find a customer and open a new Visa or MasterCard account. Gold versions of these cards and high annual fee cards such as those issued by American Express, typically cost issuers more than $100 in direct marketing expenses for each new account established. The issuer's competition for new customers, however, is not over once the account is opened. A significant portion of newly issued cards never get activated, especially since most Visa and MasterCard accounts carry no annual fee. Consumers simply save the cards in a drawer for emergencies or for some future use. In order to obtain any value from the new accounts, however, issuers must seek ways to activate new cards by getting the consumer to make at least one initial charge on their new card.
Another disadvantage associated with conventional credit card issuing systems is the time delay between the initial filing of a credit application by a customer and the subsequent receipt of an actual credit card. It has been found that such time delays provide customers with an opportunity to reconsider their request, which has contributed to the failure of customers to activate newly issued credit cards, and further results in lost opportunities for credit transactions for the issuer, because the customer must charge transactions during the time delay period to another credit card or pay cash. The issuers of proprietary credit cards, such as retailers, have attempted to overcome this time delay problem by issuing a temporary credit card to a newly approved customer. With such systems, however, the proprietary credit card issuer cannot perform a complete evaluation of the customer's credit while the customer is waiting to complete a transaction and will only authorize a new account if the customer has an acceptable credit history with one or more general purpose credit cards.
U.S. Pat. No. 5,569,897 to Masuda, entitled "Credit Card System and Method of Issuing Credit Card Using Such a System" (hereinafter, the "Masuda System"), discloses a credit issuing system that permits credit cards to be instantly issued to an approved customer from a supply of preprinted retail credit cards which are stocked in a retail store. The Masuda System, however, requires a credit check be performed while the customer is waiting to complete the transaction, a process which could take several minutes. This credit checking process described by Masuda requires an online system which may incur delays if credit history or information is incomplete or unavailable.
The problems and costs associated with current methods for acquiring new credit card accounts are not limited to issuers. Even from the consumer's point of view, conventional card acquisition techniques are unsatisfactory. Many consumers are confused and discouraged by the repeated attempts by various card issuers to solicit the consumer's business through repetitive direct marketing efforts. In addition, consumers are often frustrated by the long delay between submitting an application to an issuer and receipt of the actual credit card. Furthermore, many consumers hesitate to apply for credit cards for fear of being embarrassed by rejection.
As apparent from the above-described deficiencies with conventional systems for acquiring new credit card customers, a need exists for a system that will allow credit card issuers to instantly issue credit cards to credit-qualified new customers. A further need exists for a system that allows issuers to encourage instant activation of newly issued credit cards. Yet another need exists for a system which encourages consumers to utilize new credit cards by instantly issuing and activating a new credit card as part of a chargeable event. A further need exists for a credit card issuing system which allows affinity partners to receive credit cards in anticipation of the arrival of a potential credit card customer, so that the credit card can be physically handed over to the consumer and activated as part of a chargeable event.